The high-end coffee emporium: A sign of Asia’s changing neighborhoods

Tokyo’s Nakamenguro neighborhood has come a long way from its days as a backwater industrial area with a polluted river to a popular cherry blossom watching spot during hanami season.

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The latest sign that the neighborhood has been revitalized is last week’s opening of a Starbucks’ Reserve Roastery, a high-end shrine to coffee that operates in just four other cities around the world: Seattle, New York, Shanghai, and Milan. Hundreds of people queued in the rain outside the store that would further put Nakameguro in the spotlight.

“The predominantly residential area with a mix of upscale and downtown has seen more openings of cafes, apparel shops and small specialty stores targeting the younger generation,” says Naoko Iwanaga, research manager for JLL Japan. “Welcoming a Roastery, and the world’s biggest one at that, really tells you how far it has come.”

As urbanization surges worldwide, areas once avoided by residents have made roaring comebacks that have changed the physical and cultural fabrics of their cities. With cafes and boutiques often the first sign of change, the evolution of a neighborhood can have a big impact on the entire real estate investment landscape.

“These are the places that draws people to live, work and just generally spend time,” Iwanaga says. “That kind of attraction plays a big role in how companies and investors make decisions about where they want to be in a city.”

Rising real estate

The turnaround for Nakamenguro, about 14 kilometres from the financial district of Marunouchi, started in the 1980s, when the Japanese government planted cherry trees along the Meguro River. Designers from nearby fashionable Daikanyama district started moved in during the 90s, attracted by lower rents.

“Nakameguro then became established as a ‘branded mixed-use area’ when Tokyu Corporation built coveted station front redevelopments such as Nakameguro Gate Town in 2002 and Nakame Arukas in 2009.”

Land prices in the area increased as gentrification advanced. Data from Japan’s National Land Price Survey shows that land prices in 2018 stood at 3,500,000 yen per square meter, surpassing the previous peak in 2008.

Occupational real estate prices are likely to rise, too, due to the limited supply and greater demand, says Iwanaga. Retail could especially benefit.

“The experience-oriented new Starbucks is expected to contribute to increasing further footfall in the area. This shall be a further appeal to young and ambitious shop owners looking to open stores in the area.”

Symbols and status

When Starbucks first Reserve Roastery opened in Seattle in 2014, it was hailed as a high concept emporium that fuses artisanal coffee with restaurant-worthy food and designer furniture.

Starbucks’ Reserve Roastery made its Asia debut in November 2017 with a launch in Shanghai. Located on Nanjing Road West – a thoroughfare with luxury shopping malls and gleaming office buildings such as Plaza 66, Citic Square and HKRI Taikoo – it’s also a cultural magnet for tourists and locals alike. The Museum of Contemporary Art and newly-opened Shanghai History Museum are among its draws.

“Nanjing Road West has long maintained its position as both a high end shopping destination as well as a premium office district that has a large number of working population in the professional and financial services,” says Daniel Yao, head of research, JLL China. “By being here, Starbucks’ Roastery further positions Nanjing Road West as a must-go destination.”

The entrance of a Starbucks’ Reserve Roastery in Tokyo could have a similar impact for Nakameguro, Iwanaga says, especially as it is shaping up to a food destination with the likes of the acclaimed Seirinkan pizzeria and the Nakameguro Koukashita strip of stores and shops under the railway tracks which made the area hipper than ever.

“When people think of mixed use areas in Tokyo, they think of iconic neighborhoods Shibuya, Omotesando or Ebisu. Nakemeguro is well positioned to join that league and raise its profile globally.”